Whether it's aboutthe younger womanmarrying theolder man or theyounger man marryingthe older woman, the financialplanning issues in these May-Decemberrelationships require much moredetail work than traditional marriages.
It's not a simple issue of playing theodds on longevity. If the couple haskids, the death of a spouse can be cataclysmic—and despite the probabilities,the older parent doesn't always diefirst. Even without kids, the effect ofpoor financial planning can be devastatingto the surviving spouse.
Marriage between contemporariesis tough, but a 20-to 30-year age differencecan make it a whole new ballgame.For couples far apart in age consideringa trip to the altar, the followingare some issues to consider:
•Contemplate a prenup. While aprenuptial agreement will protect youto varying degrees in case of divorce, ithas an important secondary benefit—itwill force both of you to think about allthe financial issues not only if you split,but if one of you becomes incapacitatedor dies. Good financial advisors inthe prenup process should take youthrough all possible worst-case scenariosyou might face during your marriedlife. You'll have to disclose your assets,liabilities, money goals, and how you'llprovide for kids you want, as well askids from previous marriages. You'llalso be forced to think about whatcould happen if one of you becomessick or permanently disabled and howyou'll feel if you're still working 10years after your spouse retires. Even ifyou agree not to do a formal prenup,treat the process as a necessary first stepin planning well for the future.
•Life insurance, life insurance,and life insurance. Though olderspouses will pay more for it, life insuranceis critical for both spouses. It's notjust about the older spouse dying first.If the younger spouse dies, what happensto the kids if the older spousepasses away before they're on theirown? A financial planner can help coupleswork through these scenarios andfind the right insurance options.
•Consider long-term care insurance.You both may stay healthy ashorses well into your 90s, but end-oflifecare is always expensive. Mostnursing home stays last 2 years andcost well over $100,000 per person. Ifyou cannot cover that cost out-ofpocket,you should consider long-termcare insurance options.
•Women need to become moreaggressive investors. According tothe US Census Bureau, the average ageof widowhood is 55. Though thelongevity gap between men and womenwill probably narrow in the future,women still need to plan for a longerretirement than men. Add the cost ofraising kids as a single parent and otherhousehold expenses, and retirement canbecome a distant dream for survivingspouses. Make sure both of your retirementstrategies are reviewed for all possibilitiesbefore you say, "I do."
•Inventory survivor's benefitsnow. It's not a terribly romantic subject,but it makes sense to see what youmight get from public and privatesources if your spouse dies. Forinstance, you are eligible to receive survivorbenefits from the Social SecurityAdministration if your spouse dies andyour children are minors. If you areboth working, it's definitely worth atrip to your company's human resourcesdepartment to talk throughsurvivor's benefits offered by yourrespective employers.
•Get your wills, health directives,and beneficiary information inorder. Young couples often wait a fewyears until talking about wills, right-todie,and other issues tied to mortality.Couples with big age differences can'tafford to wait. Plan it now, and whenyour marriage is official, make sure youexecute new wills, health care powers ofattorney, medical directives, and up-todatebeneficiary information on all yourjoint and separate assets.
•Same-sex couples need todevise specific plans. Same-sex couples—particularly those with widegaps in age—need to pay particularlyspecial attention to financial planningand their legal status. That's even moreimportant if they are starting families.Longevity issues for same-sex couples(ie, men dying sooner or women livinglonger) need to be taken into accountfor all areas of financial planning, aswell as estate and child custody issuesthat are generally challenging for gayand lesbian parents.
Reprinted with permission from the Financial PlanningAssociation (www.fpanet.org), the membership organizationfor the financial planning community.